The Year-End Tax Planning Checklist for Business Owners

Pull your profit and loss through September. If your books are behind, that is the first thing to fix, because every item below depends on a real number.

Project the last three months. A rough guess based on last year's fourth quarter beats no guess at all.

Compare that projection to what you have paid in estimated taxes so far. The fourth quarter federal estimated payment is due January 15, 2027, and it is much easier to adjust now than to be surprised in January.

If you missed or underpaid an earlier quarter, pay the shortfall now. The IRS penalty grows with time, and it can apply even if you end up with a refund.

Equipment and vehicles. If you are planning a purchase, the timing matters. To deduct it on your 2026 return, it generally has to be bought and placed in service by December 31, not just ordered.

How you pay yourself. If you run an S corporation, your salary has to be reasonable for the work you do, and payroll for 2026 closes with the last pay run of the year. If you are a sole proprietor or LLC wondering whether an S corporation makes sense for 2027, this is the time to run the numbers.

Retirement accounts. A Solo 401(k) or a SEP-IRA can do a lot for a self-employed owner, but the two have different deadlines. A SEP-IRA can usually be opened and funded up to your filing deadline, while some Solo 401(k) steps are tied to year-end. If you are considering either, talk to us before December 31 so we can tell you which clock you are on.

Income and expense timing. Depending on how your year went, it may make sense to send invoices in January instead of December, or to pay certain bills before year-end. This only works in some situations, so check with us before moving money around.

The Illinois pass-through entity tax election. If you own an S corporation or partnership in Illinois, this election can change how state tax flows to your personal return. It is worth a conversation before your entity return is prepared.

Collect a W-9 from every contractor you paid this year. It is far easier to ask in December than in late January.

Mark the dates. W-2s and 1099-NEC forms are normally due January 31, both to the people you paid and to the government. For the 2026 forms, January 31, 2027 lands on a Sunday, so the official deadline moves to Monday, February 1, 2027. We would still aim for January 31, because a weekend is a lousy time to find out a contractor never sent back that W-9. S corporation and partnership returns are due March 15, 2027.

Clean up the books. Reconcile every bank and credit card account through December, and separate any personal expenses that snuck onto the business card. Your future self (and your CPA) will thank you.

Build a simple budget for next year that you will actually open again in March.

Put quarterly estimated payment reminders on your calendar now.

Decide who owns payroll deadlines in your business. Illinois and federal payroll deposits run on different schedules, and deadlines slip when nobody owns them.

Retiring this year. Your paychecks stopped, but the tax bill did not retire with you. Social Security only has federal income tax withheld if you ask for it on Form W-4V, and the default withholding on pension and IRA payments may not match what you will actually owe. We can look at what has come in so far and help you set up withholding or estimated payments for 2027.

Roth conversions. Moving money from a traditional IRA to a Roth IRA means paying income tax now on the taxable part of what you convert, in exchange for qualified withdrawals that come out tax-free later. The converted amount counts as income for the year you convert, so a conversion meant for 2026 has to happen by December 31, and once it is done it cannot be undone. A lower-income year, like the first year of retirement or a slow year in the business, is often when a conversion makes the most sense, so talk to us before you move anything.

Changing jobs. Give your new employer a fresh Form W-4 instead of guessing, and if you put money into a 401(k) at both jobs, add the two together, because the yearly cap on salary deferrals generally applies to your total, not to each plan. If both employers withheld Social Security tax and your combined wages went over that year's wage base, the extra can come back as a credit on your return. For the old plan, a direct rollover to your new plan or an IRA avoids the mandatory withholding that comes with taking a check.

Selling a home. If you sold your main home this year, you may be able to exclude up to $250,000 of the gain from income, or up to $500,000 on a joint return, as long as you meet the ownership and use tests, which generally means you owned it and lived in it for at least two of the five years before the sale. A rental or a second home follows different rules. Hang on to the closing statement and the receipts for improvements like an addition or a new deck, since improvements add to your basis and shrink the taxable gain.

Withholding changes. A raise, a bonus, a marriage, a new baby or a side gig can pull your withholding out of line with what you will owe. The IRS Tax Withholding Estimator can help you work out whether to hand your employer a new Form W-4, and adjusting sooner spreads the change over more paychecks. If some of your business income is not covered by withholding, a fourth quarter estimated payment can close the gap.

Retiring in the next few years. The years right before retirement are when planning does the most good. If you are 50 or older, catch-up contributions let you put more into your 401(k) or IRA than younger savers can. It is also the time to map out what happens to the business and which accounts you will draw from first, because both decisions shape your tax bill for years after you stop working.